It’s a no-brainer to buy real estate right now and other outrages

Here’s the transcript of yesterday’s chat on my independent service, TradingWithCody.com. We broke the questions and answers down into two sections as usual — Economy/markets/trading/strategy and Stocks. See you next week at 2pm EST at http://tradingwithcody.com/chat for more Q&A where you can ask me anything.

Q: Cody, I have a general question about real estate. I am residing in Phoenix and was wondering if this is the right time to buy a house? I know you are going to be here in Phoenix and I can attend the meeting so I can personally meet you. A: Just last night I was telling my parents about a piece of land here in NM that is for sale for $10k for 1 acre with a country club social membership included down from $30k a couple years ago and down from $15k a couple weeks ago and how I’m meeting with brokers to look at it. Real estate might take 3 or 5 or even 10 years to “recover” but I do think it’s much closer to a bottom than a top and I do think if you have a time horizon of say, a full generation out as I do in my real estate investments, that it’s a NO BRAINER to start buying real estate right now when NOBODY else wants to and those who want to can’t find the money.

Q: Thanks Cody. I will start looking for my first house ever. You are going to be in Phoenix, AZ next week? Can I also come to that meeting? A: Yes, I will be in Phoenix giving a speech and moderating a panel at the IMN Superbowl of Indexing and yes you can and should go! Here’s alink

Q: Could you chat about your recent re-thoughts on mobile stocks in the light of euro-eco-chaos? Thanks for the great service. A: Those mobile stocks have gotten very tricky because of the overbuilding and over-ordering that the Android tablet (and some of the Android handhelds) did over the summer. Apple suppliers are probably the safest, and Apple and Google themselves are probably also the best way to invest in mobile growth for now.

Q: Getting mixed signals from you Cody. Short term you are cautious however mid to long term you are bullish on your tech stocks/portfolio in general. Problem is just yesterday you said 2 more years of a bull run may now not happen. So which is it? Is 2 years out not mid term? Will the coordinated move today not extend the tech bull market? Please explain. A: I’m sorry about the mixed signals. I’m doing the best I can navigating this incredibly strangely centrally-controlled stock market and financial system that is frankly foreign to anything resembling a “Free Market”. I’m very concerned that there’s nothing the EU can do anymore to “fix” their banks besides finally forcing them to recognize their insolvency and recapitalizing them with new management without legacy lies and fraud to protect. That will likely cause market panic in the near-term but that will likely be the best buying opportunity of our lifetimes. If they do somehow figure out how to kick this can down the road once again, tech stocks will deliver upside in that rally. And that rally might very well still turn out to be bubblicious if it is to occur, but I don’t think the odds favor that any more, as I did a couple months ago. I understand how things are VERY hARD- HUGE HUGE KUDOS to you for your call before the S&P dropped 10% and stocks fell 10-20% in 2 weeks time. I was able to sidestep that UGLY action and got back in just a few days ago and am again selling this POP. My question was do we still anticipate that tech bubble rally after S&P 1100 level in a short term time frame? It feels for now that santa is coming early.

Q: Cody, what is the general outlook of FIO? A: Did you see my analysis about FIO when I initiated it as a buy along with several other posts full of FIO analysis? It’s a great long-term potential investment with some downside, but probably a heckuva lot more upside potential to make up for the downside risk. It will be wildly volatile, I would guess though.

Q: Hi Cody, I didn’t get in on the FIO trade when you did, do you think now would be a good time or too late? A: Buying FIO right here right now mostly depends on your time horizon, although I’d look at buying a starting position, perhaps 1/3 of what you eventually want to own in it regardless of your time horizon. Buy weakness in this one if you’re a short-term trader, and just buy and forget it if you think it’ll go up five or ten fold in the next five or ten years. Will need to stay on top of the trends and technologies to invest in this one though, that’s for sure.

Q: Do you think I should wait or buy some more FIO now? Thanks! A: I’m a buyer of FIO on weakness and you’ll probably see me scale into some more calls myself in coming days or weeks.

Q: Cody, with your negative outlook on banks in general, what’s your opinion on a FAZ play? A: The problem with FAZ is two-fold. One, as I’ve written here before, just using an ETF and not finding an LPS and WFC that specifically crashed after we shorted them, is, well, “lazy” according to one of my mentors. And the other is that 3X thing — why be greedy? If we’re right and we use puts and shorts, we’ll make good $. If we’re wrong we’ll be okay. If you use the FAZ and you’re wrong, you’ll get killed.

Q: LPS. Obviously you’re still a bear…but what do you advise re puts vs. just shorting the stock? And if puts, got a specific play? Awesome dude. Thanks. A: LPS – I’m short stock from much higher levels and don’t plan on covering it for a very long time. I’m also actively buying and bidding on LPS puts, mostly as I’d noted the other day puts that are $2 above and $2 below the current quote, which is now $18 or so.

Q: Just to clarify re LPS: You told me your short-then-puts history, but as for me; as my first “entry” you would recommend going with those puts rather than just shorting? Is that for the extra leverage? A: I guess I should have finished explaining why I mentioned “dating fashion execs”. Because I’ve seen several friends over the years sell the hell out of their shares when they see their cycle turn down.

Q: What did you think of SNDK downgrade yesterday on possible earnings miss? GREAT WORK CODY— A: I’m concerned that Thailand floods or some other unforeseen development is somehow going to hurt SNDK in the near-term. But as you guys know, I was a big buyer of SNDK in the $30s and sold down a lot of those puts as it’s run higher including when it was in the mid $50s recently. Some of whatever bad news might be out there is now priced in with the stock back in the high $40s, but with the markets seemingly very risky in the near-term, SNDK could be quite volatile with some downside. We’ll have to navigate carefully, as I’m been advising since darn near catching that recent major top in the markets a couple weeks ago.

Q: Is there a good short term play on C if it drops below 24 or 23? A: I’m leery of trying to catch any upside bounce in the financials. They’re insolvent without govt-approved accounting gimmicks and ongoing major bank welfare. As for the short side, I’m a buyer of puts and a shorter on strength, not on weakness. Thanks Cody. That’s a nice perspective.

Q: Cody I have another question about GOOG. Can we buy June calls now or should we wait for it to go down next month? A: I think Google’s probably gonna trade with the markets with a strong upside bias. That is, if the markets crash, Google won’t crash as badly and if the markets rally, Google will rally even more than the broader markets. I plan on buying more GOOG on weakness, but am in no rush, as you guys know.

Q: What do you think of LULU and your thoughts if they start opening stores in Europe? Is this a good entry point or a wait and see? A: I’ve studied and/or dated women in the fashion executive industry a few times over the years and I think retail clothing investing is a very simple formula: Catch a brand or company driving a trend (as LULU did/does?) and short the hell out of it when it cracks (CROX GPS etc, anybody?). I’m not up on the latest trends and haven’t ever bought a LULU product, so that’s about as helpful as I can be on that one. Should read: Catch a brand or company driving a trend (as LULU did/does?) and ride the long side and THEN short the hell out of it when it cracks (CROX GPS etc, anybody?). I’m not up on the latest trends and haven’t ever bought a LULU product, so that’s about as helpful as I can be on that one.

Q: Hi Cody, what are your thoughts on the AAPL action today? With the general market up so much, AAPL should be performing better. Do you place any credence to the Maxpain theory and the large amount of weekly call OI at the $380 level? Thanks in advance A: I never put too much weight into a single day’s action in a single stock. And I’ve just got no idea what the MaxpainIO380 theory is, but it does sound like something I’d see advertised outside of a GNC. LOL sorry I was referring to the weekly options OI dictating where apple’s share price ends up upon expiry. http://www.aaplpain.com

Q: Is it a good time to pick up some AAPL calls when it drops down below 365? A: Did you notice that I shorted AAPL puts last Wednesday when it was cracking? I just don’t know if AAPL’s got much upside in the near-term but I also think it’s probably not got much downside either. Those $360 strike puts I cited for you guys the other day as I was shorting them for nearly $20 each are now just above $11 each. Shorting AAPL puts instead of buying AAPL calls is probably going to be my strategy for a little while.

Q: Hey Cody thanks for the heads up on AMR. There are rumors on Seeking Alpha that say “the stocks will probably be cancelled”? A: TO BE CLEAR — AMR is a trade that I will be COMPLETELY OUT OF before the end of this week. AMR, the current stock, will eventually stop trading and be worthless I would suppose. This was a rare megacap bankruptcy filing trading opportunity. NOTHING MORE THAN THAT.

Q: Hi Cody. Have you been following the action on FFIV? It has had a great run of late and keeps on giving. A: Yes I was kicking myself just this morning upon seeing FFIV spike once again. I’ve just not yet bought that stock back yet since having ridden that one to some huge gains over the years before closing my hedge fund back in 2007.

Q: What do you think of Doug Kass buying RVBD and SFSF for long term? A: Doug Kass is an old friend of mine and he, along with Jim Cramer, were instrumental in helping me set up my own hedge fund as a total unknown cowboy with no track record back in 2002. That said, I’m not sure how long-term Doug will truly be in his long-term tech names. He’s more a trader than an investor in my mind. Furthermore, as you guys know, as much as I love any other trader or investor, I’d rather them be thinking I’m absolutely nuts and stupid and wrong in my picks than to see them on my side. Contrarianism, as I keep telling you guys, is a way of life!

Q: Cody, you still doing the deal for veterans? A: Any police officer or soldier or veteran gets TradingWithCody.com for free. Just email us for details. Thanks again for subscribing and reading.

Cody Willard writes Revolution Investing for MarketWatch and posts the trades from his personal account at TradingWithCody.com. At time of publication, Cody was net long Apple, Fusion-IO, Sandisk, Google, AMR, Riverbed, and net short LPS, WFC.

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